Mr. RAINS. What about college housing, under this setup? Do you handle that, Mr. Mason?

Mr. MASON. No, I do not.

Mr. COLE. That will come later under community facilities.

Mr. RAINS. I want to say something about mortgage money, but I assume it would be better to take that up with the head of FNMA. Mr. COLE. I think so, or, Mr. Rains, it is an overall problem which we might take up when we have completed our presentation. I think FNMA, the chairman of the Home Loan Bank Board, others in FHA, and I, would discuss it generally with you.

Mr. RAINS. All right.

The CHAIRMAN. Dr. Talle.

Mr. TALLE. Just one question in connection with the use of the term "cooperative housing.”

I think the record should show whether ordinary taxes apply to that kind of housing, or whether they do not?

Mr. COLE. I did not quite get your question.

Mr. TALLE. I would like the record to show, in connection with the use of the term "cooperative housing," whether the usual taxes apply. Mr. MASON. The real-estate taxes are paid by a cooperative housing project just like any other real-estate taxes are paid by anyone else. There would be an advantage in Federal taxation on a cooperative rather than on a corporation.

Mr. TALLE. How important would that advantage be?

Mr. MASON. I think it would depend upon the earnings, of course. Mr. TALLE. So the advantage, as far as taxation is concerned, applies only to Federal income tax?

Mr. MASON. That is correct, Dr. Talle.

Mr. TALLE. Thank you.

The CHAIRMAN. Mr. Multer.

Mr. MULTER. Mr. Mason, and then only to the same extent as an individual homeowner has a tax advantage?

Mr. MASON. That is correct, Mr. Multer.

Mr. MULTER. I would like to have you develop a little for us the point Mr. Patman touched upon, Mr. Mason, with reference to outstanding commitments or certificates of eligibility which have been issued at the time of the change of the law, as to how it affected various builders and their projects, and then also I ask you to submit to us, or have your staff do it, a proposed amendment that would cover the situation so that those people would not be left with an investment that they can't recoup.

Mr. COLE. Are you speaking of Wherry Act, Mr. Multer?

Mr. MULTER. No, cooperative housing, and any others, under the other sections, who may have made large investments, and who were left out when we changed the law.

Mr. MASON. I am sure, Mr. Multer is aware that cooperative housing has never been an easy program. It is not something that you just start out today and decide to do. It requires putting a lot of people together, as well as building a project, and FHA, under the old law, in working with these people, in order to furnish this encouragement to them, issued what was called an unsigned letter of eligibility. It had no official standing, and was just a sort of a token thing which indicated that the project was under consideration.

But based on this many people did go ahead and had naturally progressed quite a way on these projects, and now those people find that it is not possible for them to carry through those projects under the existing law, and they have a natural reluctance to start all over again, as would be the simpler way, perhaps—I mean, they could move the project to some location where it would be more economically possible, but that presents problems to them, so they just sit back and do nothing, and, naturally, they have a loss on the plans, and preparations that they have been through.

Is that the thing that you wanted me to cover?

Mr. MULTER. Those people have also paid substantial fees to your agency which cannot be recouped. They have also made substantial investments to bring in facilities and utilities to the proposed project, which they can't recoup unless the project goes forward.

Mr. MASON. Some of them have certainly; yes, sir.

Mr. MULTER. It is your opinion that these people are entitled to some help, and should get some help by way of change in the statute so they can go ahead with those projects?

Mr. MASON. It is my feeling that if we want cooperative housing built and I think there are a number of people who do that this would be an excellent way to get more cooperative housing built.

Mr. MULTER. And an indication of the desire of that housing is not only the pressure from the builders who would like to go ahead, but we have also communications from the proposed occupants or cooperative owners, who are asking for help so that the projects can get underway. Isn't that so?

Mr. MASON. That is correct; yes, sir.

Mr. MULTER. Did you have an opportunity to examine H. R. 2638, Mr. Mason? That is my bill.

Mr. MASON. I have not studied this one, Mr. Multer, I am sorry. Mr. COLE. Mr. Multer, I know of the bill; and the agency hasn't analyzed it. May I say to you that we do not look with favor upon setting up a new National Mortgage Corporation for housing cooperatives. As I said to Mr. Patman, we want to and will do everything we can to work with the committee and you to do what can be done to assist in carrying out cooperative housing.

So if you would like to have us and our staff work with you during your deliberations we will be glad to do so.

Mr. MULTER. Well, I know from past experience, particularly when you were on this committee, and joined in the report on cooperative housing, that your sympathies are for that kind of project, and we in the committee I think would like to work out the mechanics of it to make sure that that kind of housing can go ahead.

May I say this: Since I haven't hesitated to find fault with governmental agencies from time to time, I want, at this time, to give you a little pat on the back and say that during the Easter holidays, I visited Puerto Rico, and I went through their housing projects, and not only were the people there very happy about your cooperation and the work your agency is doing, but the Government officials there could not say enough in praise of the cooperation you were giving them in helping them to clear up their housing situation.

Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Kilburn.
Mr. KILBURN. No questions.

The CHAIRMAN. Mr. O'Hara.

Mr. O'HARA. Mr. Mason, I notice on page 2 of your statement that the volume of FHA title I insurance has decreased in the last few years. Did that decrease come from the unfavorable publicity in connection with that program?

Mr. MASON. It might have come from that, sir. One never knows, but I suspect that the greatest volume of the decline came from the fact that we now will not insure many items which we did insure before, and did a substantial volume in. But to say to you definitely that the other is not true would not be possible, of course.

Mr. O'HARA. What items were decreased?

Mr. MASON. I can't recount each one of them, sir; but swimming pools, patios, fire alarm systems were things that we felt were troublesome. Not that they necessarily were not good items, but they presented problems in selling that were subject to abuses.

Mr. O'HARA. Mr. Cole, I am particularly interested in housing for the senior citizens, and I might say that a bill sponsored by 12 members of this committee has met with what appears to be wide publicapproval, judging by letters received from all parts of the country. Have you had the opportunity to read that bill, Mr. Cole?

Mr. COLE. Yes, I have. We would prefer to take it up in a few minutes, under the public housing feature, because Mr. Slusser will be with me here at that time and you can question both of us, or if you prefer I can comment on it.

Mr. O'HARA. I merely bring it up to call it to your attention, anď I think we can discuss it when we take up public housing. Thank you very much.

The CHAIRMAN. Mr. McDonough.

Mr. MCDONOUGH. Mr. Cole, did I understand you to say, in reply to Mr. Rains, that with the expiration of title VIII that the jurisdiction of all future projects would be under the Department of Defense?

Mr. COLE. No, Mr. McDonough, the Congress hasn't yet determined what program should be carried out in the future with respect to military housing.

There are a number of proposals now before Congress. One of them, of course, is housing through direct appropriations. The other is a bill which has been introduced both in the Senate and in the House which would provide for a housing program which the military would program, develop, and which would be insured by FHA but guaranteed by the Department of Defense.

What finally will be the legislation approved by Congress, I don't know. I merely say that from the agency's point of view we think that title VIII should be abandoned.

Mr. MCDONOUGH. Well, those projects that are now in existence are under your jurisdiction?

Mr. COLE. Oh, yes.

Mr. MCDONOUGH. I have had some complaints from some Wherry projects in California that because of the requirement that occupancy must be for not less than 30 days, that in many instances where the project is isolated from any other housing facilities the personnel that comes on the base that may be necessary, for instruction work, technical services, and so on, may not be there for 30 days, and I have proposed an amendment which makes the time less than 30 days for occupancy

for that kind of personnel, providing you would outline the regulations for that occupancy.

Would you object to that kind of an amendment?

Mr. COLE. Mr. McDonough, it would change the present philosophy and policy on Wherry Act housing, which was to be constructed for permanent personnel. We would take a look at it. I know that the problem which you mention is an acute one and a serious one. I don't know all of the problems which FHA might find in connection with it. Do you have any comment on it, Mr. Mason?

Mr. MCDONOUGH. The present requirement is that occupancy must be for not less than how many days?

Mr. COLE. Thirty days.

Mr. MCDONOUGH. And it must be military personnel?

Mr. COLE. Yes, sir.

Mr. MCDONOUGH. These people that I am talking about are auxiliary to the military personnel, they are technical personnel, who are needed. Mr. COLE. May I interrupt? I have been advised that it may be civilian personnel as well.

Mr. MCDONOUGH. Well, many times these people are auxiliary to the military personnel and are necessary. There is no other place for them to be housed, and it seems a practical thing, and it certainly wouldn't, in my opinion, interfere with the original purposes and intentions of the Wherry Act at all.

Mr. MASON. Mr. McDonough, this could be handled, but it sort of puts us in the hotel business.

Mr. MCDONOUGH. I understand it does, but at the same time what are you going to do where personnel is needed on the base, and there is no place to house them? It is a problem.

Mr. COLE. It is really an acute problem.

Mr. MASON. It would take legislation, Mr. McDonough, because the current provision in the law on transient occupany does cover all types of FHA loans.

Mr. MCDONOUGH. In reference to the 35,000 additional public housing units

Mr. COLE. Mr. McDonough, we agreed with the chairman that we would take up each item when I have each Commissioner present, if that is satisfactory.

Mr. MCDONOUGH. Can you tell me what your experience has been since the 1954 act was passed on low-cost housing? The lower-cost type of housing included in that bill.

Mr. COLE. It hasn't been very satisfactory.

Mr. MCDONOUGH. What has been the problem?

Mr. COLE. I must say this, that experience is yet to be had. I am encouraged by a number of inquiries which we are having now from various communities and localities, and from industry itself.

I think a great deal can be and will be done. At present, however, the program is moving along rather at a leisurely pace.

Mr. MASON. I think, Mr. McDonough, that this is natural and to be expected. It takes industry, which this bill is written for, a little while to get off dead center and get going on any project.

Mr. MCDONOUGH. You mean we haven't passed the cycle where the program can actually get into operation?

Mr. COLE. That is our judgment. In other words, I think the leisurely pace was expected, and also necessary to get the program into operation.

Mr. MCDONOUGH. Do you think it is the result of public demand that there is more demand for more costly housing than there is for that type of housing?

Mr. COLE. Certainly there is very strong demand for a little higherpriced housing. I don't mean to say that there isn't a strong demand for the low-cost house, there is a great demand for it, but also there is demand for a little higher-priced house, too.

Mr. MASON. Mr. McDonough, that means more space, and the growing American family needs more bedrooms, which adds to the cost. of the house.

Mr. MCDONOUGH. That is right. There are two things I think in the 1954 act that would make it very possible in some parts of the United States to do away with public housing altogether. You have the slum clearance and rehabilitation, and modernization of blighted homes in congested areas, and you have the low-cost housing program, both of which should supply the needs for a lot of people that would otherwise have to go into public housing units if those two titles were not developed.

Mr. COLE. I am very enthusiastic and very optimistic about the possibility.

Mr. MCDONOUGH. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Vanik.

Mr. VANIK. I will pass now, Mr. Chairman.

The CHAIRMAN. Mr. Betts.

Mr. BETTS. Just to carry one step further Mr. O'Hara's remarks: about title I, I think since the last time you were up here we have that coinsurance feature; isn't that correct?

Mr. MASON. Yes.

Mr. BETTS. That has probably done as much as anything to offset the difficulties?

Mr. MASON. Well, this is one of the matters which can be debated again. We have had some few lenders who have gone to their own programs rather than ours, but we do not feel that the volume of this is substantial, and we don't feel they went necessarily because of the coinsurance, but because of the ability that they had to finance these other sorts of selling programs, which FHA was unwilling to sell.

For instance, we will not now insure a loan until the man has been in the house for 6 months, and there is a certain demand for somethings that the builder leaves out, which can be financed under a separate program. It runs into considerable volume.

Mr. BETTS. Is that a regulation?

Mr. MASON. That is a statue, sir.

It was done to prevent abuses under the act.

Mr. BETTS. Do you think that coinsurance feature is working out very well?

Mr. MASON. I think it is working out very satisfactorily. We find the banks taking a better look at the people that they make loans to,. which is the reason for this. The reason for this coinsurance was not so much the money the bank was going to lose, as the fact that the officer of the bank now has to account to his directors when there is a